Madhya Pradesh High Court
Sehore Kosmi Tollways Limited vs Madhya Pradesh Road Development ... on 29 April, 2024
Author: Vishal Dhagat
Bench: Vishal Dhagat
1
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VISHAL DHAGAT
ON THE 29 th OF APRIL, 2024
ARBITRATION CASE No. 81 of 2022
BETWEEN:-
SEHORE KOSMI TOLLWAYS LIMITED A COMPANY
INCORPORATED UNDER THE COMPANIES ACT 1956
HAVING ITS REGISTERED OFFICE AT RAMKY
GRANDIOSE 15TH FLOOR SY. NO. 136/2 AND 4
GACHIBOWLI HYDERABAD TELANGANA (TELANGANA)
.....PETITIONER
(BY SHRI NAMAN NAGRATH - SENIOR ADVOCATE WITH SHRI KAPIL
DUGGAL - ADVOCATE)
AND
MADHYA PRADESH ROAD DEVELOPMENT
CORPORATION LIMITED A STATE GOVERNMENT
COMAPNY REGISTERED UNDER THE PROVISIONS OF
THE COMPANIES ACT 1956 HAVING ITS REGISTERED
OFFICE AT45-A ARERA HILLS BHOPAL (MADHYA
PRADESH)
.....RESPONDENTS
(BY SHRI ADITYA KHANDEKAR - GOVT. ADVOCATE )
This petition coming on for admission this day, th e court passed the
following:
ORDER
Applicant has filed this application under section 11(6) of Arbitration and Conciliation Act for appointment of an arbitrator.
2. Learned Senior Counsel appearing for applicant submitted that parties entered into Concession Agreement on 9 th of September, 2011 for Development, Construction and Maintenance of Sehore - Icchawar - Kosmi Highway in Madhya Pradesh on policy of the state government under 'built, Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM 2 operate and transfer. It is submitted submitted that dispute arose as non- applicant failed to check heavy vehicles plying on the road. Due to movement of multi-axle vehicles including several heavy and overloaded vehicles transporting sand damaged bridge over the 'Seep' river. Despite request, no action was taken by non-applicant to check traffic. Later on non-applicant suspended applicant's right to collect toll contrary to Concession Agreement. Applicant gave notice to terminate agreement dated 12.03.2021. Non-applicant also issued a letter on 20.05.2021 for termination of Concession Agreement. Non-applicant released an amount of Rs.34,63,51,438/- as full and final settlement of termination payment. Due to dispute over termination payment, request was made for conciliation to Secretary, PWD but no response was received. Notice for appointment of Arbitrator was issued on 31.03.2022. Respondent failed to respond and appoint nominee arbitrator. Due to dispute between applicant and non-applicant, applicant approached International Centre for Alternative Dispute Resolution, New Delhi (ICADR) under Rule 5 of Rules of ICADR, and issued letter dated 28.06.2022 to ICADR, wherein applicant had requested to appoint the Arbitrator and constitute the Arbitral Tribunal to adjudicate the dispute between parties as per Section 44.3 of the Concession Agreement. Notice was not served upon the Centre and no response was received by him from International Centre for Alternative Dispute Resolution, New Delhi (ICADR). Thereafter, applicant has preferred this application for appointment of Arbitrator under Arbitration and Conciliation Act 1996.
3. Counsel appearing for applicant relied upon judgement passed by Single Bench of this Court in Arbitration Case Nos.50/2021 and 54/2021. In said case, applicant entered into a Concession Agreement with Madhya Pradesh Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM 3 Road Development Corporation for design, build, finance, operate and transfer of Seoni Katangi - Bonkatta. In said case also, Madhya Pradesh Road Development Corporation had entered into an agreement for construction of road. There was three agreements between parties; Concession Agreement, Substitution Agreement and Escrow Agreement. Agreement No.1 was Concession Agreement and a work's contract, agreement No.2 was substitution agreement, it is a tri-party agreement, by which, bank will substitute concessionaire in case of default, agreement No.3 is again tri-party agreement, by which, bank has become escrow agent, who holds assets of value until specified conditions of the contract are completed. In aforesaid case, Court held that Substitution and Escrow Agreements are not part of Concession Agreement in view of a specific exclusion under the definition of project agreement and parties to that agreement cannot resort to the remedy for arbitral tribunal under Adhiniyam of 1983. The bank is not signatory to Concession Agreement and, therefore, as per Provision of Act of 1983, bank cannot be referred to statutory arbitration under the Adhinyam of 1983. It was also held that a Coordinate Bench in the case of Ganga Construction Company Vs. Union of India & Ors. reported in (2015) 3 MPLJ 415, held that procedure agreed between the parties is to be followed and appointment of Arbitrator by High Court is an exception. Parties should be directed to take recourse to the procedure contemplated in the agreement itself because reference of dispute to arbitrators mentioned in the agreement is a general rule and same is not to be ignored and Madhya Pradesh Road Development Corporation was directed to nominate it's arbitrator as per procedure. Apex Court refused to interfere in Special Leave to Appeal No.5218/2023 against order dated 23.11.2022 passed in A.C.No.50/2021 and A.C.No.54/2021. On strength of said judgment and Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM 4 contract between parties, learned Senior Counsel appearing for applicant made a prayer that procedure agreed in contract be followed and respondent may be directed to appoint nominee Arbitrator and as per procedure established in the agreement, dispute may be resolved between parties.
4. Counsel appearing for respondent submitted that State Legislature has enacted Madhya Pradesh Madhyastham Adhikaran Adhiniyam 1983 (hereinafter referred to the Act of 1983) for establishment of a tribunal to arbitrate dispute, to which state government or public undertaking is a party. As per the Act of 1983, dispute means claim of ascertained or ascertainable money valued at Rs.50,000/- or more relating to any difference arising out of execution or non- execution of works contract or part thereof. It is further submitted that Section 2(i) of the Act defines Works Contract. Contract awarded to applicant for construction of Sehore - Icchhawar - Kosmi Highway on build, operate and transfer (BOT) basis falls within the definition of works contract. If there is dispute between parties in respect of such a contract, then in accordance with Section 7(1) of the Act of 1983, party shall refer in writing the dispute to Tribunal. It is further submitted that as per judgment passed in case of Madhya Pradesh Rural Road Development Authority Vs. L.G.Choudhary Engineers and Con. reported in (2012) 3 SCC 495, there is statutory provision for referring disputes before Arbitration Tribunal under the Act 1983 and party autonomy does not have any role in works contract and dispute is to be referred to tribunal as per the Act of 1983. It is further submitted that there was divergent view whether Act of 1983 will apply to terminated contract or not. Said issue was considered by a Larger Bench of Supreme Court in the case of M.P. Road Development Authority Vs. L.G.Choudhary Engineers and Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM 5 Contractor reported in (2018) 10 SCC 826. It was held that even after contract was terminated, subject matter of dispute is covered by said definition. It is further submitted that in case of Viva Highways Ltd. Vs. Madhya Pradesh Rural Road Development Corporation reported in (2017) 2 MPLJ 681 (Full Bench), it was held that in case of works contract, even if agreement between parties provides for settlement of dispute by Act of 1996 or by any other forum, then also dispute is to be referred to tribunal under the Act of 1983. It is submitted that question whether disputes arising between the parties in relation to contract entered between them, when contract is terminated, are to be referred to tribunal under Act of 1983 is under consideration before larger Bench of Supreme Court. Full Bench of High Court has also considered the issued on ascertained amount in case of Shri Gauri Ganesh Shri Balaji Construction Vs. Executive Engineer reported in (2018) 3 MPLJ 163, wherein Hon'ble Court held that ascertained amount appearing in Section 2(1)(d) includes the amount of consequential relief, which can be quantified. On basis of aforesaid arguments, counsel appearing for respondents submitted that dispute is to be referred to Arbitration Tribunal under Act of 1983 and Arbitrator under Act of 1996 may not be appointed and application may be dismissed.
5. Heard learned counsel for parties.
6. Considering the admitted fact between the parties regarding arbitration agreement, sole question which appears before this Court is whether applicant is to be directed to file his claims for settlement of disputes before Arbitration Tribunal constituted under Act of 1983 or Court can appoint an arbitrator under Arbitration and Conciliation Act, 1996 ?
7 . Apex Court while considering the issued in the case of Madhya Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM 6 Pradesh Rural Road Development Aurhority and another Vs. L.G.Choudhary, Engineers and Contractors reported in (2018) 10 SCC 826 held that State Act will cover a dispute even if there is termination of the works contract. Judgement passed in case of VA Tech Escher Wyass Flovel Ltd. reported in 2011 (13) SCC 261 was held to be per incuriam. It was held that MP Act of 1983 cannot be held to be implied repealed. Directions was given that arbitration proceedings may proceed under MP Act of 1983. Judgement dated 23.11.2022 passed by Single Judge of this Court in Arbitration Case No.50/2021 & 54/2021 was also cited before this Court. In said case, Single Bench did not refer the parties for arbitration under Act of 1983 but directed M.P. Road Development Corporation to nominate it's arbitrator and arbitrator is to proceed under Arbitration and Conciliation Act, 1996. Said judgment was under challenge before Apex Court in Special Leave to Appeal (c) No.5218/2023 and Apex Court dismissed Special Leave to Appeal on basis of said judgment. Learned Sr. Counsel appearing for petitioner had made submissions that Arbitration Proceedings may proceed under the Act of 1996, as per arbitration agreement between the parties.
8. Carefully perused judgment passed in case of Punjab National Bank (International) Limited Vs. MP Road Development Corporation in Arbitration Case No.54/2021. Reasonings are given by Court for not directing parties to arbitration under Act of 1983 and operative part i.e. paragraph-22 is quoted as under :
"22. The definition clause of 'projects agreements' specifically excludes substitution agreement and escrow agreement. In clause 11.3 of the escrow agreement and Clause 9.3 of the Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM 7 substitution agreement, it has been provided that both these agreements shall prevail. Apart from that, the Bank is not signatory to the concession agreement and merely because the format of escrow agreement and substitution agreement have been mentioned to be part of concession agreement under Clause 2(U) of the agreement, it cannot be held that the Bank is signatory to the concession agreement specially when, the 'substitution agreement' and 'escrow agreement' are excluded in the definition of project agreements. The Bank is alien to the agreement and therefore, it cannot be referred to the statutory arbitration under the Adhiniyam, 1983, which requires that the reference/claim petition can only be filed by 'either party' to the concession agreement. In the case of S.N.Prasad, Hitek Industries (supra) it has been held that there can be reference to arbitration only if there is arbitration agreement between the parties. The Act makes it clear that an arbitrator can be appointed under the Act at the instance of a party to an arbitration agreement only in respect of disputes with another party to the arbitration agreement. If there is a dispute between the parties to an arbitration agreement with other parties to an arbitration agreement as also non-parties to the arbitration agreement, reference to the arbitration or appointment of arbitrator can only be with respect to the arbitration agreement and not the non-parties. Therefore, in respect of the claims arising out of the concession agreement, the company has rightly approached the Arbitral Tribunal under Adhiniyam, 1983 for redressal of their disputes pertaining to works contract, but in respect of the disputes Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM 8 which are within the purview of escrow agreement and substitution agreement, the company and the Bank has to resort to the arbitration under the Act, 1996."
9. In this case, dispute between applicant and non-applicant in respect of Concession Agreement and not in respect of Substitution Agreement or Escrow Agreement, therefore, order passed by Single Judge in case of MP Rural Road Development Company Ltd (supra), which is a affirmed by Apex Court will not be applicable in this case. The dispute in this case is in respect of Concession Agreement, which is a works contract within the meaning of Act of 1983.
10. In view of same, Arbitration Case is dismissed.
11 . Applicant is at liberty to file his claims before Madhya Pradesh Arbitration Tribunal constituted under Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 and provision of Section 14 of limitation Act will be applicable in this case.
(VISHAL DHAGAT) JUDGE nd Signature Not Verified Signed by: NEETI TIWARI Signing time: 6/1/2024 12:48:57 PM